FOSTERING OR STRIPPING RURAL CHINA: MODERNIZING AGRICULTURE AND RURAL TO URBAN CAPITAL FLOWS

Jikun Huang, Scott Rozelle and Honglin Wang ()

The Developing Economies, 2006, vol. 44, issue 1, 1-26

Abstract: The present study focuses on the flow of fiscal and financial resources in China's rural economy during the first two decades of reform. Specifically, we seek to quantify the nature and direction of the capital flows between agriculture and the non‐agricultural sectors and between the rural and non‐rural sectors. We track identify the flows of three main sources of capital: fiscal flows, financial shifts through the formal banking system, and the implicit taxes that are moving through the grain system as a result of payment of in‐kind (e.g., delivery quotas by farmers). Through this analysis, we provide policy makers with a set of measures showing that although in recent years the agriculture‐to‐industry and rural‐to‐urban flows have appeared to reverse themselves, as late as 2000 it does not appear as if the government is not directing enough resources into the rural economy. Greater flows, however, are needed if rural China is to modernize.

Date: 2006
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